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income-tax Officer Vs. Smt. Chakka Bai Baid - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Jaipur
Decided On
Judge
Reported in(1986)15ITD328(JP.)
Appellantincome-tax Officer
RespondentSmt. Chakka Bai Baid
Excerpt:
.....was to allow the ito to apply the provision of section 149(1)(a)(w) even in case where the income escaped assessment was less than rs. 50,000 then there was no necessity of providing section 149(1)(a)(7) which provides that in case where the income escaping assessment is less than rs. 50,000 then the time limit provided is eight years from the end of the assessment year. if section 149(1)(a)(r) is applicable to the facts of the case then the notice should have been issued before end of 1971 and 1972 for the assessment years 1962-63 and 1963-64, respectively. mr. ranka, therefore, submitted that as what has been realised by commissioner (appeals) and, therefore, he has held that the reopening was bad in law and cancelled the reassessment. (i) for the relevant assessment year, if.....
Judgment:
1. These are two appeals by the department involving common grounds of appeal and as such they are disposed of by this common order. The issue that is raised is a legal issue as to whether while issuing the notice under Section 147(a) read with Section 149(1)(a)(ii) of the Income-tax Act, 1961 ('the Act') and assessment made consequent thereof the income that is deemed to have escaped should be Rs. 50,000 is only necessary while actually the addition that is made consequent to such proceedings is less than Rs. 50,000. According to Mr. S.S. Ruhela, the learned departmental representative, the reading of the provision of Section 149(1)(a)(ii) is indicative of the fact that at the time when the notice is being sought to be issued the ITO should bo of a view that the income that has escaped assessment amounts to or is likely to amount to Rs. 50,000 or more for that year. According to Mr. S.S.Ruhela, the ITO is acting on certain belief which has been formed itselves on same basis and the belief in the instant case was formed on the basis of certain information and material. The reasons that are recorded have been sent to the Board for approval which was received and after which only the notices were issued. According to Mr. S.S.Ruhela, there is no pre-condition that the income that is finally assessed must include escapement of income of Rs. 50,000 or more. What the Act requires is that the income that is likely to exceed at the time of issue of notice is Rs. 50,000 or more, Mr. Ruhela also submitted that the reasons that were recorded were examined by the learned counsel for the assessee for which purpose he had filed the copy of the order sheet entry dated 20-12-1982. Mr. N.M. Ranka, the learned counsel for the assessee, on the other hand submitted that the reading of Section 149(1)(a)(z7) requires two basic conditions: (b) the amount that has escaped assessment should be Rs. 50,000 or more.

If either of the conditions is not satisfied then the notices issued would be invalid, According to Mr. Ranka when the ITO is proposing to issue notice at that time he must have enough material which would lead him to the conclusion or belief that the income of Rs. 50,000 or more has escaped assessment which he is proposing to add. According to Mr.

Ranka this material must be the definite material not a mere view of the ITO. The provision that is intended is to be very carefully applied by the ITO. He must necessarily examine the complete material and must be of a firm opinion that income of Rs. 50,000 or more has escaped assessment. This must be followed by an addition to the assessment of a like amount. In no case, on the same material for the purpose of reopening the amount of income that has escaped assessment and that assessed could be different. He further submitted that even examination of the material it would only reveal that it was as a consequence of a search that was conducted very much later. He referred to the assessment order and submitted that the raid was done sometime in 1977.

He also referred to the assessment order and submitted that the income that is added is less than Rs. 50,000. Mr. Ranka then submitted if the intention of the Legislature was to allow the ITO to apply the provision of Section 149(1)(a)(w) even in case where the income escaped assessment was less than Rs. 50,000 then there was no necessity of providing Section 149(1)(a)(7) which provides that in case where the income escaping assessment is less than Rs. 50,000 then the time limit provided is eight years from the end of the assessment year. If Section 149(1)(a)(r) is applicable to the facts of the case then the notice should have been issued before end of 1971 and 1972 for the assessment years 1962-63 and 1963-64, respectively. Mr. Ranka, therefore, submitted that as what has been realised by Commissioner (Appeals) and, therefore, he has held that the reopening was bad in law and cancelled the reassessment.

(i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under Sub-clause (ii) ; (ii) for the relevant assessment year, where eight years, but not more than sixteen years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year ; The reading of the above two sub-clauses gives us an indication that sub- Clause (/) would apply to a situation where the income that has escaped assessment is less than Rs. 50,000 and Sub-clause (ii) would apply where the income that has escaped is Rs. 50,000 or more. The words provided in section 'amounts to or is likely to amount to Rs. 50,000 or more' are clearly indicative of the fact that the material which is in the possession of the ITO on which he has made this belief must lead to the conclusion that the income that he is proposing to include which according to him has escaped assessment should be Rs. 50,000 or more, as the word 'like' means identical, equal or nearly equal in all respects. In order to apply Sub-clause (ff) the ITO must at the time of initiation satisfy both the conditions, i.e., income that has escaped assessment and the amount of such escapement of income is Rs. 50,000 or more. The Kerala High Court in the case of P.K. Nair v. ITO [1973] 90 ITR 512 has clearly held that the provisions of Section 149(1)(a)(ii) could be applied only if at the time of formation of the belief and at the time of assessment the amount that has escaped assessment is Rs. 50,000 or more. The Punjab and Haryana High Court in the case of Bhim Singh v. ITO [1983] 143 ITR 620 had held that where the income that is finally assessed after issue of notice under Section 147(a) read with Section 149(1)(a)(z7) is less than Rs. 50,000 the reopening was held to be barred by time and invalid. These judgments are indicative of the fact that an ITO in the guise for making an addition of an amount less than Rs. 50,000 cannot state initially that income that has escaped assessment is more than Rs. 50,000 and obtain some more time which has lapsed otherwise. In the instant case, the notices were issued almost after 13 years and 12 years for the two assessment years in question. The income that is finally added as unexplained income is less than Rs. 50,000. Therefore, the reliance placed by the assessee on the above said judgments is squarely applicable to the facts of the case and, therefore, we uphold the order of the Commissioner (Appeals) and dismiss the departmental appeals.


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